Thursday, 6 October 2016

This Is Starting to Smell Like A Possible Rate Hike

The Federal Reserve stopped targeting the money supply growth rate more than 16 years ago.

Undoubtedly, Fed members are still aware of the effect an out of control surge in the money supply growth rate will eventually have on price inflation.

And if there is one mandate the Fed doesn't want to default on, it's the price inflation target. That is, facing the prospects for runaway price inflation, the Fed will simply have to tighten monetary policy.

If the recent surge in the money supply growth rate continues, it just might motivate the Fed to raise rates sooner, and possibly higher, that many seem to think.